Legal Library

Legal Alerts/Articles

When Can Employers Conduct Credit and Criminal Background Checks?

October 16, 2013 | Author: Julie A. Reddig

Law Firm: Lerch, Early & Brewer, Chartered - Bethesda Office

Although your company may have been performing credit and criminal background checks of applicants regularly for as long as you can remember, due to recent changes in the law companies performing such checks on a voluntary basis should review their current practices (particularly Maryland companies).

1.) In 2011, Maryland enacted the Job Applicant Fairness Act, which prohibits certain employers from using a credit report to determine whether to hire an applicant, terminate an employee, or set the wage rate or other terms and conditions of employment. The only employers exempt from this law are those required by state or federal law to consider an applicant’s credit report or history for the purpose of employment, certain financial institutions, certain credit unions, and employers registered as investment advisors with the U.S. Securities and Exchange Commission.

After an offer of employment has been extended, the Job Applicant Fairness Act allows an employer to obtain a credit report if (1) it will not be used to deny employment, determine compensation, or set the terms and conditions of employment, or (2) the employer has a bona fide purpose for requesting or using the information that is substantially job-related and disclosed in writing to the employee. The law provides the following examples of job positions for which an employer may have a substantially job-related purpose:

A managerial position that sets the direction and control of a business, department, division, unit, or agency of a business;

A position with access to personal information of a customer, employee, or employer. Personal information includes an individual’s first name or first initial and last name in combination with a social security number, driver’s license number, financial account number, or individual taxpayer identification number. Personal information does not include information customarily provided in a retail transaction;

A position involving a fiduciary responsibility to the employer, such as the authority to issue payments, collect debts, transfer money, or enter into contracts;

A position with an expense account or a corporate debit or credit card;

A position with access to information, such as formulas, programs, methods, techniques, or processes that derive independent economic value, whether actual or potential, for which the employer maintains confidentiality; or

A position with access to confidential business information.

2.) The second law with which an employer must comply when doing credit and criminal background checks is the federal Fair Credit Reporting Act (FCRA). FCRA requires an employer to disclose and obtain written authorization when obtaining a credit report and when taking adverse employment actions because of information in the report. While the principal focus of FCRA is regulation of credit checks, staff attorneys of the Federal Trade Commission (FTC) broadly interpret some of the terms used in the statute and have concluded that an employer who obtains and pays for criminal background checks of applicants and employees also must comply with all of FCRA’s obligations. Thus, an employer’s failure to comply with these opinions and positions, if challenged by an applicant or employee, would likely lead to an FTC investigation.

3. ) Finally, the federal Equal Employment Opportunity Commission (EEOC) has taken the position that an employer’s use of an individual’s criminal history in making employment decisions may, in some instances, violate the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964. Accordingly, it has issued guidance on the use of criminal history information when making employment decisions. This guidance cautions against using arrest records and explains how employers should use evidence of criminal convictions. All employers of 15 or more employees are subject to Title VII.

As a result of this increased regulation, employers should review the reasons why they perform background checks and the methods they use to carry them out. Broadly drafted policies should be reexamined and explanations provided as to why a background check is needed for each position for which it is performed. In all cases, policies should be updated to conform to these ever-evolving statutes.

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

Contact Lerch, Early & Brewer, Chartered - Bethesda Office

Choose Area of Practice Area of Practice is requiredFirst Name First Name is requiredLast Name Last Name is requiredE-mail Address E-mail Address is requiredInvalid E-mail Address

Describe Your Legal Matter

0/1000 characters

Describe Your Legal Matter is required

Country Country is requiredZip CodeZip Code is requiredInvalid Zip CodeCity/Town/Locality City/Town/Locality is requiredState/Province/DistrictState/Province/District is requiredPhone Number Phone Number is requiredInvalid Phone Number Preferred Contact Method

By clicking on the "Submit" button, you agree to the Terms of Use, Supplemental Terms and Privacy Policy. You also consent to be contacted at the phone number you provided, including by autodials, text messages and/or pre-recorded calls, from Martindale and its affiliates and from or on behalf of attorneys you request or contact through this site. Consent is not a condition of purchase.

You should not send any sensitive or confidential information through this site. Emails sent through this site do not create an attorney-client relationship and may not be treated as privileged or confidential. The lawyer or law firm you are contacting is not required to, and may choose not to, accept you as a client. The Internet is not necessarily secure and emails sent though this site could be intercepted or read by third parties.

CONSUMER WEBSITES

The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or should be formed by the use of this site. The attorney listings on the site are paid attorney advertisements. Your access of/to and use of this site is subject to additional Supplemental Terms.